We told you back in April that Mitsubishi was working hard to keep the cost of its i electric car lower than any other EV on the U.S. market. Originally this brought the price to an extremely affordable $21,000 base price after the $7,500 federal tax rebate, just $1,000 over the goal Mitsubishi was trying to meet before the Japan earthquake prevented their success. Now, things seem to have gone downhill. After making a big to do over the low price of its i several months ago, Mitsubishi has raised the price of the green vehicle to near Nissan LEAF levels, with a $1,135 jump in all model prices. Why?

Mitsubishi cites “unforseen changes in market conditions” for the increased price, which may or may not refer to additional challenges caused by the earthquake. This now means that before the federal tax credit, the numbers are as follows. For the ES model, the price is now $29,125 ($21,625 after the tax credit), for the SE, $31,125 ($23,625 after the tax credit), and the SE with premium package will run you a cool $33,915 ($26,415). Clearly the price creeping up is more than an inconvenience. It changes the value equation for people considering these little vehicles as grocery getters, pushing the mainstream adoption of electric cars back just a little more. However, the i EV is still the lowest-priced electric vehicle on the U.S. market, so even though the pricing is no longer stellar, it is still the best budget option for the moment.

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2 Comments

lazyreaderSeptember 13, 2011 at 1:51 pm

Inconvenience, tax subsidized electric cars are such an inconvenience to tax payers. A 7,500 dollar deduction can buy you a used car. Current generation electric cars are seen by many as a sorta ‘eff’ you to the oil companies and their supposed profits. Lets look at those profits. In 2005, oil companies in America earned a net profit of 65 billion dollars in oil revenues. In the same year the federal government “earned” 71 billion in gasoline taxes ( a derivative fraction of oil). Where does the federal government get off spending the average person’s tax dollars to help better-off-than-average Americans buy expensive new cars? The government borrows and spends on behalf of its population. Then bailed out private companies like AIG, JP Morgen, and General Motors. The government transfers private company debts to public. The tax payers will be hooked for paying off private company debts, businesses we may never wanted to do business with in the first place. That’s not the free market, the free market would have let those companies fail as they should have.

When a consulting firm interviewed industry experts and 2,000 potential buyers, it found that from now until 2020, only “young, very high income individuals”; those from households making more than $200,000 a year, would even be interested in plug-in hybrids or all-electric cars. This “small number” of people will provide “nowhere near the volume needed for mass adoption.” They will be concentrated in Southern California, where weather, state regulations, and infrastructure are all favorable to electric vehicles and took a lot of regulation and federal and state start up money. Of course the adoption is already being popularized by high-profile celebrities. Annual sales will hit no more than 465,000 by 2020 according to experts, a drop in the bucket of the 250 million nationwide automotive fleet.

There’s 2.4 billion in stimulus money for electric-car component factories, such as a Volt battery plant in Holland, Michigan. The Energy Department has loaned hundreds of millions of dollars to Ford, Nissan, GM, Tesla, and Fisker. Ramp up production of the electric car’s most expensive component, the battery, and its price will come down to mass-market levels. Economies of scale, and all that. It’s worked for other past luxury products, like cell phones and laptops; compared to mass-producing batteries for phones and computers, cars are far more difficult. Never mind the fact for the most part, phone and computer industries grew with private, not public, capital at risk and there were dozens of Silicon Valley failures in the 90’s; we are fortunate no public funds was wasted on them.

Global battery production capacity far exceeds demand for them, present and projected, with the biggest excesses forecast for Japan and the United States. With economists fears of a battery “Bubble” with the next 5 years. When it does, factory workers in Michigan will be back out on the street unless companies successfully lobby for another federal bailout.

Several studies have found, however, that introduction of plug-in hybrids and all-electric vehicles will probably not reduce overall U.S. fuel consumption in the short run, and may even increase it slightly. A report by Harvard University’s Belfer Center for Science and International Affairs found that “strong income tax credits for the purchase of new diesel, hybrid and plug-in hybrid vehicles are essentially ineffective at reducing CO2 emissions from transportation.

caemanSeptember 13, 2011 at 12:57 pm

As I read it, the tax credit is now given to the dealer, who is then expected to lower the price of the car by that $7,500. Are the dealers actually be honest and lowering the prices by $7,500, or are they throwing in a token drop of $2k to $5k and pocketing the difference?